From Domino’s 30-minutes pizza delivery to donuts, meatloaf, and tater tots from your favorite restaurant are now accessible with a click of a button. All thanks to modern technologies and hyperlocal on-demand business models, you can order your favorite food from your favorite restaurant online and get it delivered to your doorstep within a matter of minutes.
The food delivery business is now a tried, tested, and one of the most profitable business ideas of the decade for entrepreneurs like us. One such business is managed by Uber under its sub-brand -Uber Eats. Uber had already made our lives convenient with on-demand cabs, and its entry into the online food delivery market was nothing but an attempt to do a similar job with yet another hyperlocal business model.
So how does Uber Eats work? How does Uber make money from its food delivery business? Is the Uber business model for food delivery similar to its on-demand cab services? Who are the partners, and how does Uber find them? We will learn about everything about Uber Eats as a hyperlocal on-demand business. Let’s begin with the basics.
What is Uber Eats?
Uber Eats is a USA-based hyperlocal on-demand food delivery business that allows its customers to order food from local restaurants and get it delivered to their doorsteps within minutes. It’s one of the most successful food delivery businesses in the world, to be frank.
Using the Uber business model, the American on-demand cab brand launched the food delivery business in 2014. Yes, both Uber Taxi and Uber Eat follow a similar business model for operations and offer similar kinds of features to all its stakeholders: customers and its partners.
Similar to Uber cab, the Uber Eats lets your place a request on-demand request and geo-track your approaching service (cab in Uber while food in Uber eats) while you wait for the delivery within a few minutes.
How does Uber Eats Work?
Uber Eats is a platform that works with a perfect synchronization of communication between three major stakeholders:
· End Customers
· Delivery Partners and
· Restaurant Partners
The workflow of the platform is fairly simple:
1. Restaurant Partners list their brand and menu on the Uber Eat using a dedicated dashboard.
2. Local customers in the area can find a listed restaurant and place their orders using the customer app or the website interface.
3. The platform, using its special algorithm, assigns an order to a delivery partner in the area.
4. The assigned delivery partner gets a notification with pick-up and drops details of an order.
5. The assigned delivery partner picks up the order and delivers it to the specified address.
Workflow and Features for the End Customers
· Choice of restaurants: Customers can choose a restaurant from where they want to order.
· Real-time Orders: Customers can place an order in real-time and get the same delivered ASAP.
· Scheduled Order: Customers can also place an order for later based on their region, delivery time, and delivery date.
· Order status: Customers can track their order status in real-time.
· Geo-tracking: Customers can track the geo-location of the assigned delivery partner as he/she goes to the restaurant, picks the order up, and approaches towards the delivery address.
Workflow for the Delivery Partners
An Uber Eats delivery partner is an independent individual who signs-up to offer delivery services to restaurant partners and customers of the platform. Also called as Uber Eats Drivers, delivery partners get tasks as per an assignment algorithm, which uses geolocation and proximity to the restaurant of a delivery partner to assign a pick-up and delivery task.
What’s in it for the delivery partners?
Delivery partners receive:
· a pick-up fee for every pick-up they do from a restaurant,
· a drop-off fee for each order they deliver to a customer, and
· a distance fee for per-mile they travel to deliver an order,
All these changes combine to form an overall earning per order for a delivery partner. However, Uber Eats deduct a minimum service fee, ranging from 15–30% of the base earning, per order.
Workflow for the Restaurant Partners
Uber Eats is a popular online destination for the customers to order their food. It’s used by thousands of customers within a particular geographical area. Restaurants signing up on Uber Eats to get the benefit of online food ordering and maximized exposure on a popular platform. This improves the number of orders they get and sales via a 24x7 connectivity with the potential customers.
In return, Uber Eats charges a commission-per-order from the restaurants, which may range between 25–30 % of the order value. To cover the fee to the platform, restaurants usually put increased prices of their dishes on Uber Eats.
The Fundamental Uber Business Model
Uber Eats is a result of a combination of two major online business models:
A. Aggregation business model
B. The hyper-local on-demand business model
Under the Aggregation model, Uber Eats aggregates different restaurants on a single platform, which forms its B2B business model at one end of the platform. While the hyper-local on-demand business model is a result of a combination of two more business models:
· B2P (Business to Partner) relations with Delivery Personnel.
· B2C (Business to customer) relations with the end consumers.
The USP to the Restaurants with this B2B relation was explained in the previous section. Restaurants get access to a modern platform and stay in the business with the changing traits of the customers. In return, they pay a small cut to Uber for its platform as a service to them.
The Uber Eats delivery personnel are independent partners, who get a chance to earn money by providing their services to the platform. While the customers enjoy the benefits associated with online food delivery, which may include better discounts, offers, 24x7 food, hassle-free ordering, supervised quality of food, and many more.
How Does Uber Make Money?
It’s must be clear now that Uber Eats is a mere facilitator and it just connects different aspects of online food delivery on a central platform. In return to its services to different stakeholders of the entire workflow, Uber charges different types of fees:
A. Commission from the Restaurants:
Uber charges up to 30% commission from the restaurants on the total value of an order.
B. Sponsored promotions for the Restaurants:
Like any marketplace, Uber allows restaurant partners to gain a boosted visibility on the platform via special partnerships. In return for special extra commissions, Uber Eats runs sponsored campaigns for the restaurants, under which it features them on higher-visibility touchpoints such as Featured Restaurants, Discount Sections, and direct Ads, etc.
C. Fees from the Customers:
Uber charges its customers for delivering their orders. However, this fee is divided into different segments:
· Dynamic Delivery Fee: A variable delivery fee that changes from time to time, location, and surge in the demands.
· Service Fee: 15% fee on the order sub-total.
· Small Order Fee: A fixed fee of $2 if the order total is less than $10.
D. Surge Charges
The platform charges an additional dynamic fee from the customers in the busy hours. The surge charges are added to the delivery fee, which may make the base delivery fee up to 3x of the regular value. Uber has a dedicated algorithm to identify a busy region, or a boost zone, as they call it.
What’s Next for Uber Business Model?
The fundamental business model of Uber, which began with on-demand cabs, has already proven itself in the food delivery segment. Following the same business model, aka Uber for x model, many regional and global businesses have started similar businesses in other segments too.
Today, we can see uber-like businesses in almost every segment of the market. Be food delivery, cabs, storage spaces, parking lots, courier, pet-care, day-care, grooming, or hyperlocal grocery shopping, a simple Uber clone can accommodate any type of product or service in the fundamental workflow.
The future of Uber-like business into different segments seems bright, and there is still a lot of room for new entrants in the market. So, what would you start next under this model if you get a chance?